EU contribution hike for Ireland unlikely, says Brian Hayes

An increased contribution by Ireland to the EU budget, due to the surge in 2015 gross domestic product figures, is "highly unlikely" according to Fine Gael MEP Brian Hayes.

Previously Department of Finance officials said they believed, on the basis of existing EU rules, that Ireland would have to contribute an additional €280 million to the EU’s budget next year, as a result of the upward revision of 2015 GDP growth.

The restructuring of balance sheets by a handful of big corporates in the tech, pharma and aircraft leasing sectors was responsible for the extraordinary jump in Ireland’s headline rate of economic growth last year, which was revised up to 26 per cent.

Nobel Prize-winning economist Paul Krugman famously said the explosive Irish economic growth figures were best summed up as "leprechaun economics".

However, Mr Hayes said the speculation over the summer that Ireland would see an increase in its EU budget contribution next year is now discredited.

“Commissioner Georgieva [EU commissioner for budgets] has explained to me that the EU budget is a GNI-based resource, ie gross national income. Our contributions are calculated on the basis of GNI, not GDP.”

He said the difference between GNI and GDP can be huge in an open economy like Ireland.

Repatriated profits

“Our GDP growth rate will always be higher than GNI since GDP is heavily influenced by the multinational sector and profits are very often repatriated to the US and other locations. GNI does not account for repatriated profits.”

“Commissioner Georgieva has confirmed that the CSO has to inform the commission of the final GNI figure for 2015 and this will be validated by Eurostat,” he added.

In a recent parliamentary reply by Minister for Finance Michael Noonan to a question on the topic, he said his department estimates the impact of the CSO revision on Ireland's EU budget contribution for 2017 at about €380 million.

“However, other mitigating factors mean the overall increase in the EU budget contribution is now estimated to be in the order of €280 million when compared to the forecast underlying the summer economic statement.”

“My officials will continue to liaise with the European Commission in order to achieve greater clarity on the exact contribution, whether this expenditure will impact on the available fiscal space for new measures and how the commission’s overall assessment of Ireland’s compliance with the stability and growth pact requirements may be affected,” he added.